Analys från DailyFX
USD/JPY Technical Analysis: To Know Yen, Follow Yields For Now
Talking Points:
- USD/JPY Technical Strategy: JPY strength aligning with move lower in UST Yields
- USD/JPY Selloff to Face Fresh Fed Rhetoric; RSI Signal in Focus
- Previous Post: USD/JPY Technical Analysis: JPY to 2017 Highs vs. USD, Atop SW Ranking
- SSI is currently +2.57 on USD/JPY as 72% of retail traders are currently long: To stay up with the Speculative Sentiment Index, please click here.
Correlations ebb and flow. USD/JPY and UST yields are two markets that will go from a mild to strong correlation, and late March has a strong correlation with the two global macro assets. The 20-day rolling correlation of UST 10-Yr Yields and USD/JPY is 0.82, which is quite significant.
For those of you watching yields in the US, you know there has been a move into Treasuries on a one-two punch of the “Bearish Hike” from the Fed who failed to give USD Bulls who had already bought the currency something new to cheer and bring in more buyers. A week after the hike, which had seen yields come off, we saw a failed political push to repeal a prior standing health care act. The market took the failed overhaul to pass by the supermajority as a sign that the market was likely getting ahead of itself in putting faith in the new administration to pass thestimulus to bring about inflation.
This fundamental backdrop that brought lower yields has also brought USD/JPY lower as USD weakens on fewer prospects of more rate hikes than anticipated by the Fed. You can see below the USD is sitting with the rest of the Commodity FX Bloc as the relatively weakest G8 currencies at the end of March.
March 28, 2017, Strong/ Weak Rating (JPY Strong/ CAD Weak)
The technical picture aligns nicely (for the bears) with the fundamental picture. In short, we are seeing a clear alliance of a bearish fundamental outlook with lower yields (price moving higher) and higher JPY. The chart pattern that we focused on last time was a bear flag pattern, which is identified from a consolidating pattern that finishes by rejoining the trend, which for 2017 has been lower.
The price target for a bear flag breakdown is a 100% extension of the first move lower from the lower high. Where traders should take note is that the bear flag target (108.400 is a mere 20 pips away from the 200-DMA (108.20). This makes for a nice price target on the downside if you’re a trend follower and a nice stop losslevel if you’re a trader looking to buy USD/JPY before a presumed move higher.
For now, the bias will remain lower with obvious counter-trend moves along the way that are expected to lack follow through. The invalidation of the bearish view would be a move back above the 114 (Daily Ichimoku Cloud).) A move above 114 would argue that the breakdown on the bear-flag did not have the follow through and momentum to carry through, but I would watch UST Yields move above resistance as well as an Intermarket confirmation on such a countertrend development.
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D1 USD/JPY Chart: USD/JPY Trading Lower On Validated Bear Flag Breakdown
Chart Created by Tyler Yell, CMT
USD/JPY Sentiment: Japanese Yen looks set to gain vs. weak USD
USDJPY: Retail trader data shows 72% of traders are net-long with the ratio of traders long to short at 2.57 to 1. In fact, traders have remained net-long since Jan 09 when USDJPY traded near 116.998; the price has moved 5.7% lower since then. The combination of current sentiment and recent changes gives us a stronger USDJPY-bearish contrarian trading bias. (Emphasis Mine)
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Shorter-Term USD/JPY Technical Levels: Tuesday, March 28, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.
Contact and discuss markets with Tyler on Twitter: @ForexYell
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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